Bank of England Governor Andrew Bailey surely set the cat among the pigeons in an interview published this week.

It was a curious incident all round.

Mr Bailey has seemed overly diplomatic towards the ruling Conservatives, to put it mildly, since becoming Bank Governor in March 2020.

He has been notably reserved when it has come to talking about the impact of Brexit on the economy and has at times seemed positively keen to play down the effects of the UK’s departure from the European Union highlighted by others, including predecessor Mark Carney.

Mr Bailey seemed to find his voice a little on Brexit last month, when he declared in a speech to the Central Bank of Ireland’s financial system conference in Dublin that the UK’s departure from the EU “has led to a reduction in the openness of the UK economy”.

It was not that much, but it was something.

And what Mr Bailey had to say about the UK economy in the interview with The Chronicle in Newcastle published this week seemed to really aggravate some Conservatives.

This was interesting, given Mr Bailey was stating a simple reality about the UK economic outlook, even if he did do so in an uncharacteristically forthright manner.

It is fascinating how some Tory figures seem very sensitive indeed about comments highlighting the weakness of the UK economy.

Many might conclude this indicates the performance of the economy during their party’s long period in power is something of a sore point for them.

Who knows? It has for years now been difficult to know whether Conservative Cabinet ministers actually believe what they say about the economy doing relatively well, and Brexit being a good thing. Many people would struggle to conceive that these senior Tories could possibly believe this but these are days in which heightened ideology seems far too often to cloud clear thinking and analysis.

Mr Bailey expressed concern over the UK economy's potential to grow in the interview with The Chronicle.

 

 

He said: "If you look at what I call the potential growth rates of the economy, there's no doubt it's lower than it has been in much of my working life.

“It does concern me that the supply side of the economy has slowed. It does concern me a lot.”

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Mr Bailey also warned that bringing annual UK consumer prices index inflation back down to the 2% target set for the Bank of England by the Treasury would be “hard work”.

Annual CPI inflation fell from 6.7% in September to 4.6% in October, according to data published last month by the Office for National Statistics.

Mr Bailey emphasised we were not going to see another month where there was a fall of around two percentage points in the annual inflation rate.

Only last week, Chancellor Jeremy Hunt declared he was delivering an Autumn Statement “for a country that has turned a corner”.

Mr Hunt, it seems, has a very different perspective on the economy to that of Mr Bailey.

Of course, the growth forecasts from the independent Office for Budget Responsibility support what Mr Bailey is saying.

The OBR, publishing its latest forecasts to coincide with the Autumn Statement, projected only weak UK gross domestic product growth over the next two years, of 0.7% in 2024 and 1.4% in 2025, following expansion of 0.6% in 2023.

This is far weaker growth for the coming two years than it had projected in March.

However, it did not take long for high-profile Tories to round on the Bank of England’s Governor for daring to talk about the UK’s economic weakness.

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The Express quoted former Conservative leader Sir Iain Duncan Smith as follows on Mr Bailey: “He needs to be a little more judicious with his ¬language and a little more apologetic about the mess they got into because of their failure to deal with interest rates early.

“They have had to go higher and further than other countries have and that is down to his watch. So, I am sorry he should choose to pour cold water over everything. The economy is in a far better state than he thought it was. It’s outperformed all his dire predictions and I believe it will spring back.”

There is obviously room for debate on the interest rate decisions of the Bank of England’s Monetary Policy Committee.

However, deflection should not be the order of the day here.

It would be nice to see the Conservatives being a lot more apologetic about their myriad economic policy failures, including the damage done by their failed austerity programme and their hard Brexit, when it comes to the UK’s woeful growth outlook.

Senior Tory David Jones was quoted by The Express as follows: “It is regrettable the ¬Governor adds to people’s concerns by repeatedly talking the United Kingdom down. The economy has shown itself considerably more resilient than many of its competitors, not least Germany, which is likely in recession.

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“The Governor needs to be more of a Tigger and less of an Eeyore.”

This notion that Mr Bailey is somehow talking the UK down is baffling. The growth projections speak for themselves. Mr Bailey is simply stating the numerical reality, and putting it in the context of the situation over his lifetime.

Conservative MP and arch-Brexiter Sir John Redwood meanwhile declared to The Express: “The Chancellor presented a brighter case for the economy only last week.

“It’s very important the authorities help to build confidence and get behind a strategy to cut inflation and get growth up.”

However, trying to portray a situation that is grim as something that is bright is not going to change reality.

It is crucial that the Bank of England asserts its independence, and tells things as they are, for the good of everyone.

And Mr Bailey and his colleagues must not be put off from speaking their minds by those Conservatives who are so passionate about free, unfettered markets but seem to prefer direct and radical intervention when someone says something they do not like.